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TI, Nokia gang up on Qualcomm

CDMA R'Us

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Maybe there's money in the emerging Iraqi cellphone market?

Although Qualcomm accounts for less than twenty per cent of mobile chipsets, Texas Instruments and Nokia want a piece of the CDMA pioneer's lucrative business.

TI, whose OMAP platform gives it a dominant position in the GSM/GPRS handset business, has announced a deal with ST Micro to produce integrated circuits for cdma2000 1X and 1xEV-DV devices, with Nokia's help. Nokia and TI both have CDMA licensing agreements with Qualcomm.

CDMA manufacturers privately complain that Qualcomm lags in producing chipsets with advanced features that the GSM world takes for granted, such as Bluetooth. TI and Nokia reckon they can produce CDMA chipsets cheaper and bring them to market faster.

Qualcomm shouldn't mind the competition too much: it receives licensing royalties on all chipsets sold. But it will test the boast that Qualcomm can compete on implementation.

Although CDMA is largely confined to the United States and Korea, with 10m subscribers in the highly competitive Chinese market, that was enough to earn Qualcomm a profit of $314 million on revenues of $1 billion in the quarter that ended in March. (After it's accounted for disentangling itself from Brazil operator Vesper).

Qualcomm's licensing business accounts for around a quarter of that billion, and is of course, almost entirely pure profit. The chipset business takes in around two thirds of earnings ($652 million) in Q2 2003, clearing $223 million in profit.

Can Nokia and TI afford to put pressure on those margins (Qualcomm's chipsets profits were down 22 per cent last quarter)? That remains to be seen: Qualcomm starts off with several advantages, not least of which is that it doesn't have to pay itself royalties.

On the other hand, the new entrants will bring OMAP to CDMA - a a hardware platform that's a known quantity for manufacturers. ®

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